Stock Commentary - New York week to May 29, 2006

NEW YORK: equities started the reporting period to May 29 in negative mode, as oil prices rose, but then moved upwards for the rest of the holiday-shortened week, to leave the Dow Jones an overall 1.4% higher. Pharmaceutical and biotechnology stocks generally moved up after their dismal showing the previous week, with 33 of those tracked rising and only eight seeing a decline. Some Wall Street watchers are beginning to think that it is time to look at the Large Cap stocks once again. Even though these issues may not be doing as well as the smaller ones, some analysts feel that they will pay off over time - and they are just the type of investments people should hold for a long time. They point out that the larger firms are a safe haven in a tough economy and will offer dividends, even if the stock performance is not as impressive. "Boring" offers less risk all around, they add. If interest rates and risks continue to increase, large-cap stocks will benefit. And for now, they note, these stocks are cheap.

Genentech up 4.0%, rose on news that it had filed a supplemental Biological License Application with the US Food and Drug Administration for its breast cancer drug Avastin (bevacizumab; see page 23). Wyeth fell 2.8% on May 23, after it reported late-stage clinical trial data for its next-generation antidepressant DVS-233, which showed that patients in a Phase III study experienced nausea (see page 28). However, the stock recovered slightly, with an overall fall of 2.0%. David Risinger of Merrill Lynch downgraded Wyeth to neutral from buy. The side effects of DVS-233 are making the drug seem less attractive, he said, noting also that the firm's kidney cancer drug, temsirolimus, does not seem to be that effective Moreover, the effectiveness of an antipsychotic medication candidate is "questionable," he told clients. All in all, he feels the company's late-stage pipeline may be weak. Nevertheless, he kept his 2006 and 2007 earnings per share numbers at $3.12 and $3.36, respectively, but did cut estimates further out. Vertex leapt 14.6%. The stock was upgraded from sell to neutral by David Witzke of Banc America, saying that the firm has modified the Phase II design for its VX-950, which makes its success more probable.